How NFTs will change museums and art in general

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The crisis caused by the current pandemic has affected every sector. In fact, we have grown accustomed to reading gloomy headlines about business growth in all kinds of sectors, and big museums are no exception.

How NFTs will change museums and art in general
October 4, 2021

The crisis caused by the current pandemic has affected every sector. In fact, we have grown accustomed to reading gloomy headlines about business growth in all kinds of sectors, and big museums are no exception.

According to recent news, museum visits in Spain dropped more than 70% in 2020. Worse still, a study carried out by the International Council of Museums has shown that more than 30% of museums have been forced to reduce their staff, and nearly 6% may never reopen to the public, in particular those that are privately funded.

Faced with such adverse situation, museum managers have been forced to find new income streams to try to offset the loss of traditional income such as ticket sales and merchandising. In this context, going digital is destined to play a key role.

In the same way that we are used to seeing reproductions of works of art in all kinds of media, from postcards to clothing, it seems that museums are not prepared to miss out on the opportunities new digital environments offer. With that in mind, they are increasingly embracing the revolution in the art world caused by NFTs (non-fungible tokens), a digital technology that not only authenticates digital artwork but makes it unique.

Thus, to the growing inclusion of digital works into museum collections (such as the digital art and design collection of the prestigious Victoria and Albert Museum in the UK) new initiatives are being added to try to monetize museum collections by marketing the “digital shadows” of the works in their collections.

A few months ago, Florence’s Galleria degli Uffizi announced that it had sold a unique, extremely high-resolution reproduction (authenticated by an NFT) of Michelangelo’s painting “Tondo Doni” for 140,000 euros. Likewise, on September 7, St. Petersburg’s Hermitage Museum made 440,000 US dollars by  auctioning a digital version authenticated by NFTs of five works from its collection by Michelangelo, Leonardo da Vinci, Kandinsky, Monet and Van Gogh.

But converting original works of art does not stop there: a group of experts has proposed digitizing and authenticating blocks of stone from the Roman Colosseum as a way of funding the maintenance of the ancient construction. Not only has the proposal been considered, but the Italian Ministry of Culture has actually announced the forthcoming publication of specific rules on the sale of unique digital reproductions by public museums in Italy.

This is because the sale of the “digital shadow” of works of art in tangible form raises a whole range of legal questions. An example of this complexity arose recently when a number of museums found that a group of supposed art and technology experts were offering a collection of NFTs for works in their collections without having requested any permission.

Just like any other disruptive innovation, the application of NFTs to the art world poses new legal challenges and opportunities, which need to be clarified as this new technology takes hold.

For any work of art, including the classics, NFTs can offer an advantage in fighting one of the biggest problems in the art market: alleged forgeries. Blockchain technology can offer an indestructible and immutable way of certifying the information about the person who has created a certain NFT, the date of creation and the identity of successive buyers. This offers a competitive advantage to artists or even the institutions, museums and galleries that own the physical collections. Blockchain will easily enable them to certify the authenticity of the work for which the NFT is created, for peace of mind of subsequent buyers.

Clearly, the technology underlying NFTs is not a silver bullet to definitively combat fakes on the market. Sometimes, NFTs are created by artists of works being digitized or by their legitimate owners, but that is not always the case. That is why when purchasing NFTs, especially those not created by the artist or the legitimate owner, prospective buyers must diligently check the information in the blockchain on the creator and make sure that it matches that of the artist or the legitimate owner. Otherwise, fakes or improper attribution of authorship of a work converted into an NFT can make their way onto the market, as seen in some of the examples above.

The uncertainty and legal challenges surrounding NFTs are even greater for works of art still covered by intellectual property rights, in a number of ways.

Firstly, when buying an NFT, the transfer of intellectual property rights associated with the NFT is paramount. This is a problem that does not normally appear in usual purchases of physical works of art. When a physical work of art is purchased, the buyer does not need to also acquire the intellectual property rights over the work. Broadly speaking, ownership of the physical work already allows the buyer to enjoy the work and to display it at home, in a museum, a gallery or anywhere else. That tangible reality may not be so obvious with works of art converted into NFTs: because they are digital assets, they are most likely bought for the purpose of exploiting the file in some way, e.g., online channels. Therefore, ownership is required not just of the NFT, as would be the case for physical works of art, but also of a license for the intellectual property rights to enable that exploitation or whatever use the buyer intends to make of it.

Secondly, transactions involving NFTs over works of art with current intellectual property rights in force create another conundrum—the resale right. When a physical work of art is sold with participation of an art market professional, usually a gallery, auction house or art dealer, the artist or the heirs are entitled to a percentage, i.e., a share of the resale price. This is a statutory right that cannot be waived and survives for a while, even after the artist’s death. Transposing this right to transactions with NFTs is far from clear, particularly considering that smart contracts used to sell NFTs usually include clauses to ensure that the artist is compensated if the file is sold in future.

Lastly, NFTs, their conception and execution may raise many other legal challenges. It is not unusual for NFTs in the art world to be created from third-party works or images. Creating digital collages using pre-existing photographs or images, or creating new works from classic or contemporary works artistically defines many of the works of art created as NFTs. As you might imagine, this can create conflicts and legal problems with the owners of the intellectual property or with image rights holders of the original photographs or works used to create new digital works through NFT. The problems resulting from merging all these rights can affect not only the owners of this kind of NFTs but can also disrupt how they can use them.

It is still too early to predict how NFTs will fare in future, or whether they will be synonymous with the artistic revolution of our time. Reactions from their proponents and critics are visceral and contentious. In March 2021, American artist Mike Winkelmann (Beeple) sold at auction at Christie’s an NFT of the work entitled The First 5000 Days, a collage of digital images taken across 13 years, for 69 million dollars. Beeple’s reaction on Twitter was eloquent: “holy fuck”. The New York Times was a little more circumspect: it disdainfully asked how anyone could pay more than 60 million dollars for just a collage of digital images.

If NFTs bridge the gap between eccentric trends and true business models in the art world, we can be sure of one thing: the legal challenges that the art world will face will be on a par with the impact this new technology may have on it.

Authors: Albert Agustinoy and Pablo Ramírez

October 4, 2021